Psychosocial rehabilitation services have been effective in improving certain aspects of overall functioning for schizophrenic individuals as a group. Nonetheless, there is wide individual variation in the success of these interventions. Therefore, improving the effectiveness of these services will require a better understanding of the individual factors that facilitate or inhibit rehabilitative outcomes, and that influence the character of service delivery. Concerning individual factors, there is a substantial literature on cognitive and psychophysiological deficits in schizophrenia. Deficits have been found in the areas of attention and information processing as well as psychophysiological arousal. However, there has been little study of the functional significance of these cognitive and psychophysiological deficits; consequently we know little about their relationship to the daily living of schizophrenic patients, or to the effectiveness of community-based psychosocial rehabilitation efforts. It is now generally agreed that understanding these relationships is essential to increasing the effectiveness of rehabilitative services in schizophrenia. The goal of this research is to increase our understanding of the cognitive and psychophysiological factors in schizophrenia that predict rehabilitative gains in psychosocial functioning, and that impact the character of service delivery. This study will use a longitudinal design. 160 schizophrenic individuals consecutively admitted to two comprehensive community-based psychosocial rehabilitation programs will be assessed at baseline and then followed prospectively during rehabilitation for twelve months. Measures of cognitive and psychophysiological variables will be done at baseline and again twelve months after baseline. Assessment of psychosocial functioning will be done at baseline, six, and twelve months after baseline. Cognitive variables will consist of measures of memory, early visual processing, vigilance, concept formation, and procedural learning. Psychophysiological variables will consists of tonic and phasic measures of skin conductance and heart rate during rest, habituation, and stress conditions. Assessments of individual outcomes will include psychosocial functioning (work, social functioning, independent living) and clinical factors (hospitalization and symptomatology). The character of service delivery will be assessed with measures of intensity and comprehensiveness. Bivariate, multivariate and cross-lagged panel techniques will be used to address the study aims. Findings from this study wild. (I) identify the neuropsychological and psychophysiological factors that predict specific rehabilitative outcomes and influence the character of service delivery; (ii) contribute to informed and cost-effective treatment decisions based on individual limitations of clients; (iii) provide a foundation for developing new rehabilitative interventions that remediate or compensate for basic deficits.